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ENTITY
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🎵Wisdom Density:
Moderate
🧭14 concepts
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Nebraska Furniture Mart (NFM)
Nebraska Furniture Mart is one of the world's most successful home furnishings retailers. Acquired by Berkshire Hathaway in 1983, it serves as the prototype for Buffett’s "Ideal Business": a operation built on extreme volume, minimal expense, and exceptional value to the customer.
📍 Origin
Buffett acquired 90% of NFM in 1983 for $55 million (on a $60 million total valuation). The deal was done on a single page, without an audit, based entirely on Buffett's 30+ years of observation of the Blumkin family.
"Today Nebraska Furniture Mart generates over $100 million of sales annually out of one 200,000 square-foot store. No other home furnishings store in the country comes close to that volume." — 1983 Letter
🏛️ Business Model
- The Moat: NFM’s competitive advantage is its massive scale combined with an expense-to-sales ratio that competitors cannot match. This allows NFM to sell at prices so low that competitors often claim they are "unfair."
- Asset Efficiency: Operating out of a single (at the time) massive location in Omaha, it achieved unmatched household penetration.
- The Blumkin Method: Shrewd buying and passing on the savings to the customer to build enduring loyalty.
🧠 Evolutionary Significance
The NFM acquisition was a landmark for Berkshire for two reasons:
- Managerial Trust: It proved Buffett's willingness to buy businesses based purely on the character and record of the managers (Rose Blumkin and her son Louie Blumkin).
- Shift to Quality: It solidified the shift away from "cigar-butt" value (buying assets for cheap) to buying "wonderful businesses" with high Economic Goodwill.
- Permanent Home: This was the prototypical acquisition for Berkshire's Non-Gin Rummy philosophy.
- The 1992 Reunion: In 1989, Mrs. B angrily left the business to start a competing carpet store across the street. By 1992 (at age 99), she decided to sell her building and business back to NFM, reuniting the operations into an undisputed retail juggernaut. (Buffett made sure to get a non-compete this time!).
- The Texas Expansion (2013): NFM broke ground on a massive, 1.8-million-square-foot store and distribution complex in Texas (The Colony), showcasing Berkshire's commitment to reinvesting heavily into their proven "Ideal Business" models.
📊 Performance Indicators
In 1983, NFM sold more furniture than all other Omaha competitors combined. Buffett famously used NFM as the benchmark for a "Bad" vs. "Good" business relative to inflation: NFM is a "Good" business because its efficiency allows it to maintain volume without needing excessive new capital.
🔗 Connections
- Entity: Rose Blumkin (Founder)
- Concept: Economic Goodwill
- Concept: The Moat
- Source: 1983 Letter, 1992 Letter
📚 Historical Mentions & Citations (4)
Click a reference document below to expand and read the exact paragraph(s) containing this concept in the archive.
📜1983 LetterExcerpt Available▼
1983 LetterExcerpt Available
That completes the catechism, and we can now move on to the high point of 1983—the acquisition of a majority interest in Nebraska Furniture Mart and our association with Rose Blumkin and her family.
Nebraska Furniture Mart
📜1984 LetterExcerpt Available▼
1984 LetterExcerpt Available
| Earnings Before Income Taxes | Net EarningsAfter Tax | Total | Berkshire Share | | | |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: |
| Berkshire Share | 1984 | 1983 | 1984 | 1983 | 1984 | 1983 |
| | Operating Earnings: | | | | | |
| Insurance Group: | Underwriting | $(48,060) | $(33,872) | $(48,060) | $(33,872) | $(25,955) |
| | $(18,400) | Net Investment Income | 68,903 | 43,810 | 68,903 | 43,810 |
| | 62,059 | 39,114 | | | | |
| Buffalo News | 27,328 | 19,352 | 27,328 | 16,547 | 13,317 | 8,832 |
| Nebraska Furniture Mart(1) | 14,511 | 3,812 | 11,609 | 3,049 | 5,917 | 1,521 |
| See’s Candies | 26,644 | 27,411 | 26,644 | 24,526 | 13,380 | 12,212 |
| Associated Retail Stores | (1,072) | 697 | (1,072) | 697 | (579) | 355 |
| Blue Chip Stamps(2) | (1,843) | (1,422) | (1,843) | (1,876) | (899) | (353) |
| Mutual Savings and Loan | 1,456 | (798) | 1,166 | (467) | 3,151 | 1,917 |
| Precision Steel | 4,092 | 3,241 | 3,278 | 2,102 | 1,696 | 1,136 |
| Textiles | 418 | (100) | 418 | (100) | 226 | (63) |
| Wesco Financial | 9,777 | 7,493 | 7,831 | 4,844 | 4,828 | 3,448 |
| Amortization of Goodwill | (1,434) | (532) | (1,434) | (563) | (1,434) | (563) |
| Interest on Debt | (14,734) | (15,104) | (14,097) | (13,844) | (7,452) | (7,346) |
| Shareholder-Designated Contributions | (3,179) | (3,066) | (3,179) | (3,066) | (1,716) | (1,656) |
| Other | 4,932 | 10,121 | 4,529 | 9,623 | 3,476 | 8,490 |
| | Operating Earnings | 87,739 | 61,043 | 82,021 | 51,410 | 70,015 |
| | 48,644 | | | | | |
| Special GEICO Distribution | -- | 19,575 | -- | 19,575 | -- | 18,224 |
| Special Gen. Foods Distribution | 8,111 | -- | 7,896 | -- | 7,294 | -- |
| Sales of securities and unusual sales of assets | 104,699 | 67,260 | 101,376 | 65,089 | 71,587 | 45,298 |
| Total Earnings — all entities | $200,549 | $147,878 | $191,293 | $136,074 | $148,896 | $112,166 |
The following table shows our 1984 yearend net holdings in marketable equities. All numbers exclude the interests attributable to minority shareholders of Wesco and Nebraska Furniture Mart.
📜1989 LetterExcerpt Available▼
1989 LetterExcerpt Available
| Pre-Tax Earnings | Berkshire’s Shareof Net Earnings(after taxes andminority interests) | | | |
| :--- | :---: | :---: | :---: | :---: |
| | 1989 | 1988 | 1989 | 1988 |
| | Operating Earnings: | | | |
| Insurance Group: | Underwriting | $(24,400) | $(11,081) | $(12,259) |
| | $ (1,045) | Net Investment Income | 243,599 | 231,250 |
| | 213,642 | 197,779 | | |
| Buffalo News | 46,047 | 42,429 | 27,771 | 25,462 |
| Fechheimer | 12,621 | 14,152 | 6,789 | 7,720 |
| Kirby | 26,114 | 26,891 | 16,803 | 17,842 |
| Nebraska Furniture Mart | 17,070 | 18,439 | 8,441 | 9,099 |
| Scott Fetzer Manufacturing Group | 33,165 | 28,542 | 19,996 | 17,640 |
| See’s Candies | 34,235 | 32,473 | 20,626 | 19,671 |
| Wesco—other than Insurance | 13,008 | 16,133 | 9,810 | 10,650 |
| World Book | 25,583 | 27,890 | 16,372 | 18,021 |
| Amortization of Goodwill | (3,387) | (2,806) | (3,372) | (2,806) |
| Other Purchase-Price Accounting Charges | (5,740) | (6,342) | (6,668) | (7,340) |
| Interest Expense* | (42,389) | (35,613) | (27,098) | (23,212) |
| Shareholder-Designated Contributions | (5,867) | (4,966) | (3,814) | (3,217) |
| Other | 23,755 | 41,059 | 12,863 | 27,177 |
| | Operating Earnings | 393,414 | 418,450 | 299,902 |
| | 313,441 | | | |
| Sales of Securities | 223,810 | 131,671 | 147,575 | 85,829 |
| Total Earnings—All Entities | $617,224 | $550,121 | $447,477 | $399,270 |
This divine assemblage—Borsheim’s, The Buffalo News, Fechheimer Bros., Kirby, Nebraska Furniture Mart, Scott Fetzer Manufacturing Group, See’s Candies, World Book—is a collection of businesses with economic characteristics that range from good to superb. Its managers range from superb to superb.
📜1992 LetterExcerpt Available▼
1992 LetterExcerpt Available
| Pre-Tax Earnings | Berkshire’s Share of Net Earnings (after taxes and minority interests) | | | |
| :--- | :---: | :---: | :---: | :---: |
| | 1992 | 1991 | 1992 | 1991 |
| | Operating Earnings: | | | |
| Insurance Group: | Underwriting | $(108,961) | $(119,593) | $ (71,141) |
| | $ (77,229) | Net Investment Income | 355,067 | 331,846 |
| | 305,763 | 285,173 | | |
| H. H. Brown (acquired 7/1/91) | 27,883 | 13,616 | 17,340 | 8,611 |
| Buffalo News | 47,863 | 37,113 | 28,163 | 21,841 |
| Fechheimer | 13,698 | 12,947 | 7,267 | 6,843 |
| Kirby | 35,653 | 35,726 | 22,795 | 22,555 |
| Nebraska Furniture Mart | 17,110 | 14,384 | 8,072 | 6,993 |
| Scott Fetzer Manufacturing Group | 31,954 | 26,123 | 19,883 | 15,901 |
| See’s Candies | 42,357 | 42,390 | 25,501 | 25,575 |
| Wesco — other than Insurance | 15,153 | 12,230 | 9,195 | 8,777 |
| World Book | 29,044 | 22,483 | 19,503 | 15,487 |
| Amortization of Goodwill | (4,702) | (4,113) | (4,687) | (4,098) |
| Other Purchase-Price Accounting Charges | (7,385) | (6,021) | (8,383) | (7,019) |
| Interest Expense* | (98,643) | (89,250) | (62,899) | (57,165) |
| Shareholder-Designated Contributions | (7,634) | (6,772) | (4,913) | (4,388) |
| Other | 72,223 | 77,399 | 36,267 | 47,896 |
| | Operating Earnings | 460,680 | 400,508 | 347,726 |
| | 315,753 | | | |
| Sales of Securities | 89,937 | 192,478 | 59,559 | 124,155 |
| Total Earnings — All Entities | $ 550,617 | $ 592,986 | $ 407,285 | $ 439,908 |
You will remember that after her family sold 80% of Nebraska Furniture Mart (NFM) to Berkshire in 1983, Mrs. B continued to be Chairman and run the carpet operation. In 1989, however, she left because of a managerial disagreement and opened up her own operation next door in a large building that she had owned for several years. In her new business, she ran the carpet section but leased out other home-furnishings departments.